UN Compact on Migration

Michael Reddell Immigration, NZ politics

Various readers have commented in recent weeks on the United Nations Global Compact for Safe, Orderly, and Regular Migration, due to be signed next week by as many governments as can be mustered in support.   I’d had a quick skim through it and decided not to write about it here, as not only was it a non-binding political declaration, but most of it seemed more relevant to countries dealing with substantial illegal migration (and with migration mainly from very poor or disrupted countries – again, not the main situation in New Zealand).   And, as I pointed out to various readers, who needs the United Nations for immigration policy and practice to cause problems at home.  We have successive New Zealand governments, cheered on by the business and political “elites”, to do that for us.

But when I saw yesterday that the National Party –  as pro-immigration as they come – had indicated that (a) it would not support signing, and (b) it would withdraw from the agreement when it returned to government, I thought I should take another look.  It would, after all, be unusual to find myself in more of a middle-ground position on immigration issues that the National Pary.  Then it emerged that the current government has still not yet decided whether to sign up.   My suspicion remains that National’s stance is more about positioning relative to New Zealand First –  the contest for provincial votes –  than anything of substance.

Overseas, I was aware that the United States and Australia had decided not to sign, as well as a few eastern European countries – including some places whose democratic credentials are no longer unimpeachable.    But when I went looking, I found this article suggesting the pushback in Europe is spreading.    Austrian and Italy have refused to sign, and governments in Belgium, Germany and the Netherlands are under pretty intense pressure (from within).  In Holland, for example

The government ordered a legal analysis of the text last week to ensure that signing it will not entail any legal consequences. The Cabinet finally decided on Thursday that it would support the pact, but would add an extra declaration, a so-called explanation of position, to prevent unintended legal consequences.

So I reread the document, more slowly this time.  I can’t see any substantive need for the document –  it seems more about political rhetoric and framing than anything else –  and have long been deeply sceptical that the United Nations adds any value to anything much.   And, yes, the document has a pro-migration tinge to it (it talks of wanting to “promote” migration) and a rather “globalist” set of presuppositions (including the demonstrably wrong statement –  especially in the context of remote island states – that “no State can address migration alone”).   But that doesn’t mark it out from dozens of pointless international fora and international declarations.    And there is little doubt that the “elite” mindset, in Europe and its offshoots anyway, is mostly pretty strongly pro-immigration.

But it still isn’t clear to me quite what additional damage would be done by signing up to this pointless agreement.   Sure, even “non-binding” agreements will, at times, be used in domestic and international fora as a rhetorical stick to beat governments with if they ever look like stepping out of line with the mainstream.  But those sorts of arguments rarely deflect a government for long if it has domestic public opinion behind it in some direction or another (for good or ill).

There is some questionable economics in the document.  For example

Promote effective skills matching in the national economy by involving local authorities and other relevant stakeholders, particularly the private sector and trade unions, in the analysis of the local labour market, identification of skills gaps, definition of required skills profiles, and evaluation of the efficacy of labour migration policies, in order to ensure market responsive contractual labour mobility through regular pathways.

Or, alternatively, one could just let the market work it out.  When there are incipient skill shortages, wage rates tend to rise.  Same thing happens when, for example, bad weather creates a shortage of spinach or lettuce.    But, daft as the economics is, this stuff is the mindset of politicians and officials adminstering immigration schemes all over the western world. including New Zealand.  Recall that in New Zealand the current government is trying to get more actively involved in this sort of thing.

There are also totally vacuous bits, like the commitment to support and promote the United Nations International Day of Family Remittances.  Just what the world needs: another United Nations “day”.

Perhaps three clauses troubled me a little more.

There was this one

Enable political participation and engagement of migrants in their countries of origin, including in peace and reconciliation processes, in elections and political reforms, such as by establishing voting registries for citizens abroad, and by parliamentary representation, in accordance with national legislation.

I guess I can see what they are probably driving at (diasporas helping the reconstruction of the country of origin after say a protracted civil war). But, normally, we should expect migrants to commit themselves to their new country and its processes and political values and not be creating doubts about where their loyalties lie.  But in a country in which Jian Yang and Raymond Huo are MPs –  while still closely associating themselves with political interests in their country of origin –  and people like Yikun Zhang appears encouraged to play both sides –  it is hard to see how this particular provisions make things here any worse than they already are (around a small handful of our migrants).

And then there was this one

Promote mutual respect for the cultures, traditions and customs of communities of destination and of migrants by exchanging and implementing best practices on integration policies, programmes and activities, including on ways to promote acceptance of diversity and facilitate social cohesion and inclusion.

Which presents the issues as symmetric when they really should be asymmetric: the focus should be on encouraging the assimilation of the migrants, and ensuring their respect for the “cultures, traditions and customs” of the destination community –  just as when you go to someone else’s place for dinner you respect their practices, table manners etc.   One could also argue that encouraging “acceptance of diversity” and facilitating “social cohesion” are two contradictory, often mutually inconsistent, goals.  But again, flakey as all this stuff is, it is the way our bureaucratic and political “leaders” think and act anyway.  If the behaviour is a threat, it is hard to see that the UN agreement would be more of one.

Relatedly

Support multicultural activities through sports, music, arts, culinary festivals, volunteering and other social events that will facilitate mutual understanding and appreciation of migrant cultures and those of destination communities.

Quite what business this is of the UN –  or even of national governments actually – one has to wonder, but there is the “globalist” mindset for you.   And, again, it is pretty much what central and local governments do anyway.  I was interested that “religion” wasn’t on the list

And then, of course, there is Objective 17 (of the 23 in the document) which I have seen people express more serious concern about.

OBJECTIVE 17: Eliminate all forms of discrimination and promote evidence-based public discourse to shape perceptions of migration

We commit to eliminate all forms of discrimination, condemn and counter expressions, acts and manifestations of racism, racial discrimination, violence, xenophobia and related intolerance against all migrants in conformity with international human rights law. We further commit to promote an open and evidence-based public discourse on migration and migrants in partnership with all parts of society, that generates a more realistic, humane and constructive perception in this regard. We also commit to protect freedom of expression in accordance with international law, recognizing that an open and free debate contributes to a comprehensive understanding of all aspects of migration.

If that isn’t muddled I don’t know what is –  let alone, unrealistic (in no conceivable world are “all forms of discrimination” going to be “eliminated”).

The specifics under that Objective include commitments to

Enact, implement or maintain legislation that penalizes hate crimes and aggravated hate crimes

So-called “hate crime” legislation is almost always bad law and bad policy.  Punish assaults or murders or whatever as that: bad and unacceptable acts, regardless of who they are committed against or why.

And this

Promote independent, objective and quality reporting of media outlets, including internet based information, including by sensitizing and educating media professionals on migration-related issues and terminology, investing in ethical reporting standards and advertising, and stopping allocation of public funding or material support to media outlets that systematically promote intolerance, xenophobia, racism and other forms of discrimination towards migrants, in full respect for the freedom of the media.

Again, muddled at best.  You want to stop any public funding to outlets whose views are “unacceptable”, while having “full respect for the freedom of the media”.   Since I’m not entirely convinced there is a good case for public funding of any media outlets –  and since the publicly-funded outlets in New Zealand are champions of high immigration and all “worthy” leftist causes anyway –  it isn’t clear what difference this might make in New Zealand.    And there seem to be some MPs –  particularly in Labour and the Greens –  who aren’t too keen on allowing free speech on such issues anyway, whether or not we sign up to UN non-binding declarations.

And finally under Objective 17

Engage migrants, political, religious and community leaders, as well as educators and service providers to detect and prevent incidences of intolerance, racism, xenophobia, and other forms of discrimination against migrants and diasporas and support activities in local communities to promote mutual respect, including in the context of electoral campaigns.

All very asymmetric –  nothing at all about engaging with communities that might be uneasy about high immigration, or the immigration of groups with values antithetical to those of the destination community.  Perhaps, in some respects, this commitment troubles me more than most.   “Intolerance” is not an offence (in principle or in law) and it is the perfect right of people to debate –  perhaps especially in election campaigns – the future composition of their society.   A Saudi Wahhabi, a Chinese Communist Party zealot, an American evangelical, and a French secularist are all very different sorts of people. In large numbers, each group transplanted to (say) New Zealand would make a material difference to the society and polity we have here.  Those debates matter –  unless, apparently like the authors of this document –  you regard all differences of culture, politics, religion etc as superficial rather than fundamental.

As I said at the start, there is no obvious need for this document.  And even if there were obvious gaps, the very fact that it is a non-binding political declaration suggests it could meet no substantive need.  But in a New Zealand context, there are policies and practices around immigration that are much more damaging and threatening, particularly to our long-term economic performance, and perhaps in other areas too.  Among them:

  • the immigration policies of the National Party
  • the immigration policies of the Labour Party
  • the immigration policies of the Green Party
  • the immigration policies of ACT, and
  • the immigration policies of New Zealand First

I think that pretty much covers the spectrum.

There is no conceivable universe in which some international declaration –  or even agreement – around immigration would be more liberal and (in our specific economic circumstances) more damaging than what our political parties have done to us all by themselves.

 

 

What?

Michael Reddell Adrian Orr, Financial stabilty

In the press release for last week’s Reserve Bank Financial Stability Report, the Governor commented that

Our preliminary view is that higher capital requirements are necessary, so that the banking system can be sufficiently resilient whilst remaining efficient. We will release a final consultation paper on bank capital requirements in December.

In commenting briefly on that, I observed

Time will tell how persuasive their case is, but given the robustness of the banking system in the face of previous demanding stress tests, the marginal benefits (in terms of crisis probability reduction) for an additional dollar of required capital must now be pretty small.

There wasn’t much more in the body of the document (and, as I gather it, there wasn’t anything much at the FEC hearing later in the day), so I was happy to wait and see the consultative document.

But the Governor apparently wasn’t.  At 12.25pm on Friday a “speech advisory” turned up telling

The Reserve Bank will release an excerpt from an address by Governor Adrian Orr on the importance of bank capital for New Zealand society.

It was to be released at 2 pm.   The decision to release this material must have been a rushed and last minute one –  not only was the formal advisory last minute, but there had been no suggestion of such a speech when the FSR was released a couple of days previously.

And, perhaps most importantly, what they did release was a pretty shoddy effort.    We still haven’t had a proper speech text from the Governor on either of his main areas of responsibility (monetary policy or financial regulation/supervision) but we do now have 700 words of unsubstantiated (without analysis or evidence) jottings on a very important forthcoming policy issue. which could have really big financial implications for some of the largest businesses in New Zealand and possibly for the economy as a whole.

The broad framework probably isn’t too objectionable.  All else equal, higher capital requirements on banks will reduce the probability of bank failures, and so it probably makes sense to think about the appropriate capital requirements relative to some norm about how (in)frequently one might be willing to see the banking system run into problems in which creditors (as distinct from shareholders) lose money.  At the extreme, require banks to lend only from equity and no deposit or bondholder will ever lose money (there won’t be any).

But what is also relevant is the tendency of politicians to bail out banks.  Not only does the possibility of them doing so create incentives for bank shareholders to run more risks than otherwise (since creditors won’t penalise higher risk to the same extent as otherwise), but there is a potential for –  at times quite large –  fiscal transfers when the failures happen.  Politicians have more of an incentive to impose high capital requirements on banks when they acknowledge their own tendencies to bail out those banks.  If, by contrast, they could resist those temptations –  or even manage them, in say a model with retail deposit insurance, but wholesale creditors left to their own devices –  it would also be more realistic to leave the question of capital structure to the market –  in just the same way that the capital structure of most other types of companies is a mattter for the market (shareholders interacting with lenders, customers, ratings agencies and so on).

But nothing like this appears in the Governor’s jottings.  Instead, we have the evil banks, the put-upon public and the courageous Reserve Bank fighting our corner.   I’d like to think the Governor’s analysis is more sophisticated than that, and one can’t say everything in 700 words, but…..it was his choice, entirely his, to give us 700 words of jottings and no supporting analysis, no testing and challenging of his assumptions etc.

There are all manner of weak claims.  For example

We know one thing for sure, the public’s risk tolerance will be less than bank owners’ risk tolerance. 

I think the point he is trying to make is about systemic banking crises –  when large chunks of the entire banking system run into trouble.  There is an arguable case –  but only arguable –  for his claim in that situation, but (a) it isn’t the case he makes, and (b) I really hope that (say) the shareholders of TSB or Heartland Bank have a lower risk tolerance around their business than I do, because I just don’t care much at all if they fail (or succeed).  Their failures  –  should such events occur –  should be, almost entirely, a matter for their shareholders and their creditors, with little or no wider public perspective.

There are other odd arguments

Banks also hold more capital than their regulatory minimums, to achieve a credit rating to do business. The ratings agencies are fallible however, given they operate with as much ‘art’ as ‘science’.

Bank failures also happen more often and can be more devastating than bank owners – and credit ratings agencies – tend to remember.

And central banks and regulators don’t operate “with as much ‘art’ as ‘science'”?   Yeah right.   And the second argument conflates too quite separate points.  Some bank failures may be “devastating” –  although not all by any means (remember Barings) –  but the impact of a bank failure isn’t an issue for ratings agencies, the probability of failure is.   And I do hope that when he gets beyond jottings the Governor will address the experience of countries like New Zealand, Australia, and Canada where –  over more than a century –  the experience of (major) bank failure is almost non-existent.

The Governor tries to explain why public and private interests can diverge (emphasis added)

First, there is cost associated with holding capital, being what the capital could earn if it was invested elsewhere. Second, bank owners can earn a greater return on their investment by using less of their own money and borrowing more – leverage. And, the most a bank owner can lose is their capital. The wider public loses a lot more (see Figure 2).

But what is Figure 2?

figure 2

Which probably looks –  as it is intended to –  a little scary, but actually (a) I was impressed by how small many of these numbers are (bearing in mind that financial crises don’t come round every year), and (b) more importantly, as the Governor surely knows, fiscal costs are not social costs.  Fiscal costs are just transfers –  mostly from one lots of citizens (public as a whole) to others.  I’m not defending bank bailouts, but they don’t make a country poorer, all they do is have the losses (which have arisen anyway) redistributed around the citizenry.  If the Governor is going to make a serious case, he needs to tackle –  seriously and analytically –  the alleged social costs of bank failures and systemic financial crises.  So far there is no sign he has done so.  But we await the consultative document.

There is a suggestion something more substantive is coming

We have been reassessing the capital level in the banking sector that minimises the cost to society of a bank failure, while ensuring the banking system remains profitable.

The stylised diagram in Figure 3 highlights where we have got to. Our assessment is that we can improve the soundness of the New Zealand banking system with additional capital with no trade-off to efficiency.

and this is Figure 3

capital chart

It is a stylised chart to be sure, but people choose their stylisation to make their rhetorical point, and in this one the Governor is trying to suggest that we can be big gains (much greater financial stability, and higher levels (discounted present values presumably) of output) by increasing capital requirements on banks.

I don’t doubt that the Bank can construct and calibrate a model that produces such results.  One can construct and calibrate models to produce almost any result the commissioning official wants.  The test will be one of how robust and plausible the particular specifications are.  We don’t know, because the Governor is sounding off but not (yet) showing us the analysis.  Frankly, I find the implied claim quite implausible.   Probably higher capital requirements could reduce the incidence of financial crises.  But the frequency of such events is already extremely low in well-governed countries where the state minimises its interventions in the financial system, so I don’t see the gains on that front as likely to be large.    And, as I’ve outlined here in various previous posts I don’t think that the evidence is that persuasive that financial crises themselves are as costly as the regulators (champing at the bit for more power) claim.  And many of the costs there are, arise from bad borrowing and lending, misallocation of investment resources, which are likely to happen from time to time no matter how well-capitalised the banks are.

There are nuanced arguments here, about which reasonable people can disagree. But not in the Governor’s world apparently.

He comes to his concluding paragraph, the first half of which is this

A word of caution. Output or GDP are glib proxies for economic wellbeing – the end goal of our economic policy purpose. When confronted with widespread unemployment, falling wages, collapsing house prices, and many other manifestations of a banking crisis, wellbeing is threatened. Much recent literature suggests a loss of confidence is one cause of societal ills such as poor mental and physical health, and a loss of social cohesion.

Oh, come on.  “Glib proxies”……..    No one has ever claimed that GDP is the be-all and end-all of everything, but it is a serious effort at measurement, which enables comparisons across time and across countries.  Which is in stark contrast to the unmeasureable, unmanageable, will-o-wisp that the Governor (and Treasury and the Minister of Finance) are so keen on today.

As for the rest, sometimes financial stresses can exacerbate unemployment and the like,  but the financial crises typically arise and deepen in the context of common events or shocks that lead to both: people default on their residential mortgages when they’ve lost their jobs and house prices have fallen, but those events don’t occur in a vacuum.  And anyone (and Governor) who wants to suggest that mental health crises and a decline in social cohesion can be substantially prevented by higher levels of bank capital is either dreaming, or just making up stuff that sounds good on a first lay read.

The Governor ends with this sentence

If we believe we can tolerate bank system failures more frequently than once-every-200 years, then this must be an explicit decision made with full understanding of the consequences.

As if his, finger in the dark, once-every-200 years is now the benchmark, and if not adopted we face serious consequences.   Let’s see the evidence and analysis first.  Including recognition that systemic banking crises don’t just happen because of larger than usual random shocks –  the isimplest scenario in which higher capital requirements “work” –  but mostly from quite rare and infrequent bursts of craziness, not caused by banks in isolation, but by some combination of banks and (widely spread) borrowers, often precipitated by some ill-judged or ill-managed policy intervention chosen by a government.   Higher capital ratios just aren’t much protection against the gross misallocations that arise in the process –  in which much of any waste/loss is already in train (masked by the boom times) before any financial institution runs into trouble (the current Chinese situation is yet another example).

Perhaps as importantly, under the current (deeply flawed) Reserve Bank Act the choice about capital is one the Governor is empowered to make.  But his deputy, responsible for financial stability functions, had some comments to make on this point in a recent speech (emphasis added)

And Phase 2 of the Government’s review is an opportunity for all New Zealanders to consider the Reserve Bank’s mandate, its powers, governance and independence. The capital review gives us all an opportunity to think again about our risk tolerance – how safe we want our banking system to be; how we balance soundness and efficiency; what gains we can make, both in terms of financial stability and output; and how we allocate private and social costs.

It may be that the legislation underpinning our mandate can be enhanced, for example, by formal guidance from government or another governance body, on the level of risk of a financial crisis that society is willing to tolerate.

These are choices that should be made by politicians, who are accountable to us, not by a single unelected and largely unaccountable (certainly to citizenry) official.  We need officials and experts to offer analysis and advice, not to be able to impose their personal ideological perspectives or pet peeves on the entire economy and society.

We must hope that the forthcoming consultative document is a serious well-considered and well-documented piece of analysis, and that having issued it the Governor will be open to serious consideration of alternative perspectives.  But what was released last Friday –  700 words of unsupported jottings –  wasn’t promising.

(I should add that I have shifted my view on bank capital somewhat over the years, partly I suspect as a result of no longer being inside the Bank. It is somewhat surprising how –  for all one knows it in theory –  things look different depending on where one happens to be sitting.  But my big concern at present is not that it would necessarily wrong to raise required bank capital, but that the standard of argumentation from a immensely powerful public official seems –  for now – so threadbare.)

Thoughts as the immigration data disappear

Michael Reddell Immigration

Last month marked the end of an era.  In a country with larger and more variable migration flows (in and out, New Zealand and foreign) than almost anywhere else Statistics New Zealand released the last ever set of permanent and long-term migration data.  The numbers were only ever approximations –  because people changed their minds –  but they were (a) based on data collected from every person crossing the border, and (b) reported quite quickly (October’s data were released on 22 November).

As I’ve written about here previously, there is a new system being put in place, but the numbers it produces will have (on SNZ’s own reported estimates) huge margins of error each and every month, and it will be at least a year after the event until we can have even moderate confidence in estimates as to what was going in any particular month.   The issue arises most seriously in respect of the outflows of New Zealanders, for which –  of course –  there is no other administrative data, such as (say) visa approvals.  It is cavalier, another step backwards in terms of having timely data  –  whether for economic monitoring, or political and economic debate –  but perhaps convenient for governments and officials who would prefer the issues not to be debated (“just let us get on with our ‘Big New Zealand’ project”).

Even the total movements data –  which was part of understanding tourist inflows and outflows data –  is now going to be worse.  This is from the recent SNZ release

Removing departure cards means changes to the timing and composition of this release. Statistics on short-term movements (including the current report International visitor arrivals to New Zealand) will be published in a new international travel release, and long-term movements in a new international migration release.

Both releases will be published on the same day, up to 30 working days after each reference month. November data, previously published just before Christmas, will now be published in January, and December data in February.

From about 15 working days to 30 working days.  That is SNZ’s –  and the government’s idea of progress?   Then again, these are the people who seem to have stuffed up the latest Census so badly  –  and no heads, political or bureaucratic, have rolled.

But to mark the passing of the PLT data, here are a few charts.  Here is the quarterly annualised data by citizenship.

Last PLT 1

For all the talk in recent years about “New Zealanders coming home”, there was only a single quarter with a (tiny) net inflow.   The net outflow of New Zealanders is still modest by historical standards, but interestingly while there is a net outflow to Australia there is still a small net inflow (the gap between the blue and orange lines) of New Zealanders from the rest of the world.   If leaving for Australia has got harder –  and the headlines about New Zealanders’ rights in Australia more grim –  perhaps it is harder still in the rest of the world?   And, despite the fall in residence approval visa numbers (mostly granted to people already here), the net inflow of non-New Zealanders remains large.

We won’t have this timely data in future.

Migration data by citizenship is available. on an annual basis, back to 1950.  Here are the cumulative PLT numbers since then.

Last PLT 2

In the early period the net outflow of New Zealanders was tiny. For the 16 years up to an including the year to March 1965, the net outflow of New Zealanders was 10576, or an average of under 1000 a year.    In a normal country you expect to see an outflow of citizens: most people obtain citizenship by being born in a place (or naturalised in it), and some proportion of natives will always choose to leave –  whether falling in love, or simply preferring the opportunities some other place has to offer. But in normal countries –  especially normal advanced countries –  those outflows are typically small.   (Estimates, such as they are, of the number of American citizens living abroad, short or long term, come to less than 3 per cent of the total US population.)

Here is the same chart starting from the year to March 1966 and coming all the way forward to the year to March 2018 –  53 years of data.

last PLT 3

Over that period a net 968000 New Zealanders are estimated to have left –  from a country that in 1966 had a population of just under 2.7 million.

And, on the other hand, successive governments have brought in (because it increasingly has been a matter of conscious and deliberate policy) almost 1.4 million non-New Zealand citizens.  Even just in the last 30 years –  when it has all been conscious and deliberate policy –  the net inflow of non NZ citizens has been 1.1 million people (in 1989, the total population was only 3.3 million).

Even allowing for the 50 year span, they are staggering numbers (in both directions).   And perhaps what is all but unprecedented is that combination.  There are countries –  even in the modern era of largely controlled immigration –  that have had very large inflows (you could think of modern Israel or Australia in the 1950s. or Portugese settlers flooding back home in the 1970s, or the French settlers back from Algeria after independence).  And you can think of countries that have had very large outflows in modern times –  Cuba, or modern day Venezuela, Syria, or some of the eastern European countries after they joined the EU.  But I can’t think of a single case that parallels New Zealand’s radical population experiment –  a mass exodus of its own people (mostly to better opportunities across the Tasman, quite rationally), accompanied by such active large scale controlled inflows of people from other countries.  Some of the places people leave from en masse are hellholes (each of the first three of my list), but the countries in eastern Europe typically aren’t –  almost all of them now, for example, have average GDP per capita above that of the median country.

As a matter of economics, I think the policies pursued by successive governments have been daft and damaging, embarked on (and, worse, continued) in a cavalier manner that paid no serious heed to the ongoing economic underperformance and constrained opportunities of New Zealand.  Or even to how unusual New Zealand’s approach to population and migration was. I’ve laid the arguments for that case out elsewhere (eg here) and am not going to repeat them here.   I’m pretty confident that –  on narrow economic arguments – material living standards for the average New Zealander would today be better (probably materially better) had governments respected the signal in the behaviour of New Zealanders, and perhaps kept the average annual inflow of non-New Zealand citizens to, perhaps, 10000.  Over the full period that would have meant perhaps 900000 fewer non-NZ immigrants.

We’d have been smaller –  but small countries abroad do just fine –  we’d have worked more within the constraints of our natural resources, we’d have reduced the extent of the disaster that is the housing “market”, and more internationally-comparable real interest rates and a lower real exchange rate would have made firms operating in the tradables sector better-positioned to succeed from here.

But as I was thinking about the issue, another dimension occurred to me that I hadn’t previously given much attention to.  The component of the population that wouldn’t have changed much with a much different immigration policy is the people identifying as Maori.    Those people were 15 per cent of the total population at the 2013 Census, and for the sake of argument we’ll assume it is still 15 per cent now.     With a different immigration policy –  along the lines I sketched above –  the population now might only be about four million, probably less  (a net 900000 fewer migrants, but they have children and grandchildren, filling out a total population effect over several decades).  A Maori population that is 15 per cent of 5 million, would be almost 19 per cent of a population of 4 million.

This is all highly-stylised, and I’m not putting any weight at all on precise numbers, but it is a reminder that immigration policy –  going back many many decades (see Vogel on this point about his immigration policy) –  has been about reducing the relative importance (numerical weight) of Maori in modern New Zealand.  Sometimes that was intentional, and at other times probably mostly not, but effects (especially entirely foreseeable one) matter more than intentions.

Reasonable people might differ on whether this is a good thing, or even a legitimate topic for discussion.  Were one Maori, one might quite easily think it a very bad thing.  You might view the resurgence of things Maori in recent years as a “good thing” and wonder about the “what ifs” around a quite different path of immigration in modern times.  Not only would your people have been clearly the single largest non-European ethnic grouping, but your overall share in the population –  and claim on power, resources, and esteem would have been that much greater.

But it is quite possible that many others would see things differently.  Many other voters –  consciously or not –  might welcome large scale immigration partly because it can be used to relativise and reduce the position of Maori (“just another minority in the cacophony of voices”).  As someone who is sceptical of our immigration policy (over decades) for economic reasons, I’m genuinely curious as to how the liberal strongly pro-immigration voices in our society reconcile their enthusiasm for high rates of immigration and their regard for Maori (the Labour Party itself, with such a substantial Maori caucus, is the most group to wonder about, although one could wonder about the National Party too.)

Of course, if one were being hard-headed about the matter one might wonder what such an alternative society might look like.  A country that was, say, 20+ per cent (identifying as) Maori  –  with higher fertility rates than other ethnic groups –  and just a couple of per cent each Pacific and Asian (a plausible mix if we’d been targeting 10000 net non-citizen migrants for the last 50 years).  That would look and feel very different to today’s New Zealand.  One can see reasons why some –  Maori and non –  would have embraced such a mix.  But, realistically, one can also see reason why for some European New Zealanders it might have been more of an impetus to have followed the economic opportunities and gone to Australia.   Who knows which tendency would have predominated, and what  political dynamics might have emerged in the process, or what the economic implications might have been.  My arguments about the economics of immigration in the New Zealand context have tended to proceed as if there are no ethnic faultlines –  and remember my “for economic purposes, I don’t care in the migrants come from Birmingham, Bangalore, Brisbane or Beijing”.  But that isn’t so, and it may –  genuine uncertainty, at least in my mind –  matter even in thinking about likely alternative economic outcomes.  In my view, it is almost always better to let societies work these thing –  including competing interests and values – out themselves over time, rather than have governments might a heavy hand on the scales (as they do by large scale immigration programmes).

(Some earlier thought on immigration policy and Maori are here.)

 

The China Council plumbing the depths

Michael Reddell China, NZ politics

Last night I went to a function organised by the Wellington branch of the Fabian Society, to hear Tony Browne speak on “China’s place in the world and New Zealand’s relationship with it”.   Browne, as readers may be aware, was New Zealand’s Ambassador to the People’s Republic of China some years ago (2004 to 2009), when the regime was a bit less awful than usual.

Browne chose to make his speech off-the-record, so I can’t tell you what he said.  That is a shame, and not because I would otherwise choose to make any “gotcha” points from what he said.  It was an interesting address, and perhaps 100 people heard it, but for such a timely and important issue his perspective is probably one that more people should hear.  There was nuance to some of his views and arguments –  and perhaps more sign of perspective and some decency than, say, one gets from the New Zealand China Council (or our politicians).

Browne is no longer a public servant, and in that sense is free to keep his views private.  But he is hardly just a retired public servant doing his garden in Waikanae.  Since leaving MFAT he has taken on several roles that keep him close to the centre of things, even if just outside the official boundaries.  On the PRC side, he is the chair of the PRC-funded Confucius Institute at Victoria University and (rather more grandly) sits on the international advisory body to the PRC authorities on the worldwide Confucius Institute progamme.  Closer to home, he is Executive Chair of the Contemporary China Research Centre –  the multi-university body, itself closely tied in to MFAT/NZTE interests, based at Victoria and which shares offices and support staff with the Confucius Institute.  He’s also a member of the Council of the (largely) government-funded propaganda and advocacy body, the New Zealand China Council.   And he is joint programme director for the ANZSOG training programme in New Zealand and Australia for rising Chinese Communist Party officials, itself organised in a contractural arrangement with the Chinese Communist Party.  ANZSOG itself, as I’ve noted here previously, isn’t just some obscure academic body –  this trans-Tasman arrangement is chaired by our own State Services Commissioner Peter Hughes.

I suppose that had Browne been speaking on-the-record he’d have spoken less openly.  Which, in itself, tells us something, when it comes to issues like the PRC relationship, and interests.

You’ll have noted that the local Confucius Institutes – in addition to channelling Chinese foreign aid into the schools of an advanced country –  run seminars to champion the perspectives of the PRC, in conjunction with various other PRC front bodies.  No one, of course, supposes that the PRC runs the programmes out of the goodness of its heart.

And that the Contemporary China Research Centre –  chair, board members, and director and deputy directors –  have been totally silent on, for example, issues such as those raised by Anne-Marie Brady and more recently when various other academics stood up and called on the government to take more seriously the apparent efforts to intimidate Professor Brady.    Go to the CCRC website and you’ll see prominently displayed next week’s conference on the (jointly promoted by NZ and the PRC) Year of the Chinese Tourist.  Couldn’t queer that pitch I suppose.  More generally, there is nothing there this year that might be seen to represent a serious contribution to the emerging debate around the PRC, its activities in New Zealand, and New Zealand’s relationship with that evil regime.  And, of course, the CCRC is a content-provider to MFAT  –  an arrangement they wouldn’t want to jeopardise –  no doubt training new generations of public servants to minimise the evil and maximise the deference.

And ANZSOG –  seemingly more interested in the mechanism of government than the purposes (moral or otherwise) of such activity –  no doubt wouldn’t like any flies in the ointment of its special relationship with the Organisation Department of the Communist Party.   Perhaps the frameworks of the State Sector Act or the Public Finance Act come in handy in managing the abuses –  in Xinjiang, Tibet, or China more generally?

But if we can’t talk specifically about Tony Browne’s views, as distinct from his interests, we can talk about one of his bodies, the New Zealand China Council.   Recall that this body is largely taxpayer-funded, has the heads of MFAT and NZTE on the Board ex officio, as well as various other “worthies” mostly, it appears, with business interests in China.  They also have an Advisory Council, with people like Jian Yang, Raymond Huo, the head of (Beijing-front) New Zealand China Friendship Society (and others).  They are funded to promote the relationship with the PRC, which seems to involve (a) never ever saying anything critical (unlike the way real mutual relationships work), (b) trying to keep the populace quiet and on-board with the government and business project (“deals and donations; never mind the nature of the regime at home or abroad”).   There never seems to be much rigour or analytical depth to their material –  but perhaps one doesn’t expect that from propagandists.

Anyway, it appears that the China Council held its annual meeting last week.   We are told that they “raised the bar” at the AGM, although it isn’t clear what that means, assuming it isn’t just a reference to the drinks afterwards.   We are also told that the Chairman’s report was approved unanimously –  which seems an odd thing to emphasise in a press release, at least outside places like the PRC.  And what was in Don McKinnon’s report?  We are told about their work championing (New Zealand’s involvement in) Belt and Road.  We are told about how much propaganda is still needed (emphasis added)

The Council’s survey, undertaken in February 2018 and released later in the year, is the first to benchmark New Zealanders’ attitudes towards the relationship with China specifically, including the relationship as a whole, trade, investment and culture. The survey revealed a pleasing level of support for the relationship but showed there is more work for the Council to do to ensure it is understood properly

The way these taxpayer-funded “worthies” see it presumably?

But probably the key, and most telling, paragraph was this one

An, at times, unedifying debate about the extent of foreign influence in New Zealand risks unfairly targeting New Zealanders of Chinese descent but has not detracted from the value which the relationship with China delivers in terms of cultural diversity, wealth creation and jobs.

Feel the lofty condescension.  Perish the thought that academics, commentators, citizens, residents –  native and ethnic Chinese –  might actually want to debate the relationship, and challenge the deferential narrative that Sir Don and his “worthies” want to reinforce.  No specifics, no evidence, no reference to (for example) the many ethnic Chinese here who want nothing to do with the regime or what it represents, some of whom are courageous enough to speak out.  No sense that there are any issues, choices, or tradeoffs, just the great unwashed getting in the way of making money and collecting party donations.    Perhaps it isn’t really surprising, but you’d sort of hope that such an eminent Board  –  top tier public servants, senior academics, senior business people etc – would pride itself on being able to tackle substantive isses substantively.  But clearly not this lot.

The Council plumbed new depths of obsequiousness (to Beijing that is) this morning, when they released a statement on the Spark/Huawei 5G situation.  The words are those of Executive Director –  former MFAT official –  Stephen Jacobi, but it appears to speak for the Council, so we must assume that the chief executives of MFAT and NZTE are party to this position.  The statement opens

The New Zealand China Council is disappointed to learn plans for Huawei’s involvement in the development of Spark’s 5G network have been put on hold.

Not, note, disappointed to learn from the New Zealand government’s own GCSB that their assessment is that Huawei 5G equipment raises national security issues/threats. It is as if they are spokespeople for Huawei and for the PRC.

Executive Director Stephen Jacobi says the Council would not wish to see the decision complicate efforts to expand the trade and investment relationship with China.

One would like to think that observation was directed at the PRC.  After all, they (PRC) assure people that Huawei operates quite separately from the Party/state –  despite those new laws, and the presence of CCP cells in all significant PRC companies.  But it doesn’t seem likely that was the intended emphasis.

“We are not privy to the GCSB report and therefore cannot comment on its substance.  We note the Government’s reassurance that this decision is about the security of a certain technology rather than about China.  Even so, we are concerned that the decision may have repercussions.

Pretty clearly aimed at our government and the GCSB, despite –  as they concede –  having no information on the substance of the security issues.

They go on

“We hope the relationship is resilient enough to withstand occasional differences of view.  We understand Huawei is committed to finding a way forward, and we hope a resolution can be reached that is acceptable to all parties.

Wouldn’t you hope that, first and foremost, any issues are resolved in ways the safeguard New Zealand’s national security, present and future?  Most people would, but I guess not those committed to deference to Beijing.

They conclude

“Meantime, we need to continue to focus on building a relationship with China which reflects our respective values and interests and delivers value to both parties,” Mr Jacobi says.

Power, aggression, and self-assertion regardless of borders and citizenship on the one hand, and deference –  to the point of kowtow – on the other.

Reasonable people might take different views on the Huawei provisional decision.  Few if any of us have any basis for reaching a technical view. But this statement –  including from two of our most senior public servants –  seems aimed at deliberately undercutting the GCSB stance (a New Zealand government agency), queering the pitch for ministers, and seems concerned more about the interests and attitudes of Beijing –  and the ongoing sales (and party donations) of its members –  than it is about the national interests, national security, and values of ordinary New Zealanders.    But then they have Jian Yang and Raymond Huo inside their tent, so why should we be surprised.

 

Inflation-indexed bonds: are they telling us anything?

Michael Reddell indexed bonds, inflation

Data from New Zealand’s inflation-indexed bond market has been a bit of a mystery for some time.

If one looks at US data, the gap between conventional and indexed government bond yields –  the “breakeven” or implied inflation expectation – makes sense.  Here is the data for the last five years or so.

US IIBs

The US inflation target is around 2 per cent and for the last couple of years the breakevens have been pretty close to that.  There was a period of real weakness in 2015/16 but it didn’t last that long, and even then the breakevens were only averaging around 1.5 per cent.   If you were inclined to focus on the severe limitations US monetary policy will face in the next serious recession, you might even think 2 per cent breakevens for the average of the next 10 years is a bit high –  after all, the Fed has struggled to get inflation to average 2 per cent in the last decade –  but that would be a non-consensus perspective, and I’ll leave it to one side for now.

The New Zealand indexed bond market was, for a long time, rather patchy to say the least.  Indexed bonds were tried for a while in the 1980s, and then one more-modern-style long-term indexed bond was issued in the mid-late 1990s (about the time I and a colleague wrote this article).  But The Treasury was never very keen, and there was a diminishing volume of public debt anyway.     If there is any upside to the higher volume of public debt this decade (in general I’m not convinced) it is the advent of a range of government inflation-indexed bonds.  There are four on issue now, with maturity dates out to 2040.

Unlike the situation in the US, no one makes readily available here constant-maturity data for either indexed or conventional bond yields.  When the “10 year bond yield” is quoted here, it is rarely actually 10 years.  But the Reserve Bank does publish a yield series for each of the indexed bonds.  If one time-weights the (September) 2025 and 2030 indexed bond yields, one gets this approximation to a 10 year indexed yield since September 2015. (I’ve also show the yield for the 2025 bond from the end of 2013 to September 2016, when it was at least moderately close to 10 years).

indexed bond yield NZ

The fall in long-term real interest rates is certainly striking –  consistent with the fact that five years ago the Reserve Bank and most of the market thought short-term interest rates would be more like 4 or 5 per cent looking ahead. In fact, of course, the OCR has been 1.75 per cent for the last couple of years, and is currently expected to remain low pretty indefinitely.

And what if we then take the Reserve Bank’s “10 year bond yield” series for conventional bonds, and subtract the indicative indexed bond series in the previous chart?

NZ IIBs

This is the chart that parallels the US one at the start of the post.  As you can see, the two charts (one daily, one monthly) look quite similar at the start.  Breakevens here were also around 2 per cent, the target set for the Reserve Bank.  But then they diverge –  the short term cycles are similar, but the levels are very different.  On this measure, it has been three years since the New Zealand breakeven rate got even to 1.5 per cent.  As of yesterday’s data, the gap was 1.34 per cent.

Meanwhile, of course, at every opportunity the Reserve Bank assures us that inflation expectations –  survey measures, which involve respondents staking no money, and rarely any reputation (since responses are published mostly in aggregated form) –  are “securely anchored” at 2 per cent.   And, rather than address the indicators from the indexed bond market, the Bank simply passes by in silence.

Over the years, there have been various stories put forward for why information from the indexed bond market should be discounted.  For a long time, there was only one maturity, and there really wasn’t all that much of that bond on issue (just over $1 billion).   Then there were stories about illiquidity –  not much trading in indexed bonds and few or no price-makers.   Glancing through the historical data for turnover in the Feb 2016 bond, there were lots of weeks when the outright trades totalled less than $5 million, and quite a few when there were no trades at all.

But these days there are four bonds on issue, totalling about $16 billion.  Talking to a funds manager recently, I learned that another bank has just become a pricemaker in indexed bonds, such that there are now three local and three offshore institutions offering two-way prices in these instruments.  And the Reserve Bank turnover data suggests that if these markets aren’t exactly awash with trade, there is now a respectable volume of secondary market turnover in at least the 2025 and 2030 maturities (and there isn’t much turnover in conventional bonds beyond 2030 either).

I queried the fund manager as to his view on why the New Zealand breakevens are so low.  He argued that it wasn’t now a market liquidity issue (although you have to think that if you wanted to dump a $200 million position it would still be a great deal easier in the conventional market than the indexed market).   His argument was the market was still new and that there limited interest still from the buy side, including the offshore market in particular.    I was a bit surprised by that, as I recalled (long ago) when the indexed bonds were being issued in the 1990s that a lot of demand initially came from offshore (it surprised us at the time, and New Zealand inflation indexation seemed like something more naturally appealing to local pension funds than to offshore funds).   But I looked up the data, and this is what I found.

Per cent of bonds in market held by non-residents, Oct 2018
Conventional
Apr-23 67.7
Apr-25 52.2
Apr-27 67.1
Apr-29 75
Apr-33 46
Indexed
Sep-25 50.7
Sep-30 37.6
Sep-35 21.3

And, sure enough, a materially smaller proportion of the indexed bonds is owned offshore than of the conventional bonds.   The offshore proportion isn’t trivial by any means, but it is smaller (and, if anything, looks to have been shrinking a bit over the last few years).

I don’t have a good story for why that might be.  After all, New Zealand indexed bonds offer some of the highest yields in the advanced world (our longest maturity yields 50 basis points more than the US 20 year indexed bond, and the US is now a high yielding advanced economy), and much of the story of the last few years has been of a search for yield.  Search for yields often involves sacrificing liquidity.  And (critical as I am of New Zealand economic performance) the creditworthiness of our bonds, indexed and nominal, looks better than ever in relative terms, as being among the handful of advanced countries with budget surpluses and low debt.

I did hear a story a while ago suggesting that the government has simply glutted the market by issuing too many inflation indexed bonds too quickly.  At one level it is an argument that looks a bit hard to refute (the resulting yields are high relative to equivalent maturity and credit risk conventional bonds), but standing back a bit I’m not sure how persuasive a story it is.  The world markets are big, New Zealand is small (and fairly sound), and the appetite for yield has been strong.

Which is partly why I don’t think it is safe for the Reserve Bank to simply ignore that New Zealand inflation breakevens.  They may well be telling us something about medium-term expectations of inflation (implicit expectations as much as explicit ones).  After all, core inflation this decade has averaged around 1.5 per cent, the Bank has (twice) proved too quick to tighten, and if inflation has picked up a little recently, it would be reasonable to think that there will be a downturn along again before too long.

sec factor model nov 2018

Perhaps there is a more compelling story that “exonerates” the Reserve Bank.  But it would be good to see them make it, and to be able to test the quality of their analysis and research.  Simply ignoring a pattern that has now persisted for three years –  breakevens averaging less than 1.5 per cent when the inflation target as 2 per cent –  seems not particularly responsible, not particularly transparent, not particularly accountable.

 

Services exports and economic performance

Michael Reddell Exports, New Zealand economic performance

A couple of pieces I saw yesterday got me thinking again about New Zealand’s services exports and our economic performance.

On the one hand, there was an interesting ANZ report on tourism, which included this chart.

Chart of the week

Spending by international visitors has seen impressive growth in recent years.

International visitor spend by country

tourism

Source: MBIE

And then there was speech on the MFAT website by Catherine Graham, their Economic Divisional Manager.  MFAT doesn’t publish many speeches, so it was interesting to see a bit of an economics angle, even if  it was infected with the government of the day’s propaganda.  Perhaps that was inevitable to some degree in a speech by a public servant, but gratuitous endorsement of the Provincial Growth Fund didn’t seem strictly required in a speech notionally on “small state diplomacy”.

There was a certain breathlessness to the speech

All countries and regions face technological mega trends that are consequential to businesses and governments and affect decisions. Digitalisation, artificial intelligence and automation will increasingly affect wage and employment levels, in developing as well as developed countries. The key difference from the past is that the change – driven by computing power – will occur at an exponential, rather than linear, rate. 

Maybe, although the best guess remains that people who want to work will continue to be able to do so.  Markets adjust like that.  And global productivity growth shows no sign of such a dramatic transformation (for the better).

Also from the breathless side was this

Non-state actors such as the major e-commerce platforms (think Amazon and Alibaba) and the social media giants (think Facebook, Instagram and Google) are each on their own much bigger economically than New Zealand (and many other countries’ economies). How do we navigate our relationships with them as a nation state?

This seems mostly (a) meaningless or (b) wrong.  For example, on checking I learned that the market capitalisation of Facebook was US$390 billion, and its annual revenues were less than US$50 billion.  On no meaningful metric is it bigger than New Zealand, but even if it was there is a fundamental difference between a company and a nation state.  For better or worse, Facebook could be regulated out of existence almost overnight.

But the line that caught my eye, and prompted this post, was a couple of paragraphs later

Continuing to create and leverage smart ideas will be essential for New Zealand’s agricultural sector to keep delivering value to the economy and address broader societal and environmental challenges. Elsewhere in the economy, New Zealand’s success in weightless exports – such as software development, services embedded and embodied in physical products, and the creative arts – are growing apace. It is likely that this trend will be supported by ongoing technological advances.

You’d have thought that a senior economics person in our foreign affairs and trade ministry might have thought it worth mentioning that exports as a share of GDP peaked (in modern times) 18 years ago, or that there has been no growth in the real per capita output of the tradables sector in the same period.

But what about those “weightless exports” specifically?  Here is the time series of New Zealand’s services exports for the last 30 years.

services x nov 18

The 1990s looked quite good, indeed the peak wasn’t even until as late as 2003, but since then it has mostly been downhill.   There was a bit of a pick-up a couple of years ago, but even that doesn’t look to be going anywhere in particular.  The services export share of GDP is currently at a level first reached in 1996.  This is success?

That ANZ chart I started the post with looked quite impressive.  Nominal series over long periods of time often do.  But MBIE now has a nice tourism data dashboard (there is a migration data one coming), with some useful summary charts.  Here are a few of them

tourism mbie3

tourism MBIE 2

and, as a share of GDP –  direct and (estimated) indirect contributions

tourism MBIE 1

(UPDATE: A careful reader points out that these charts, which I directly downloaded from the dashboard, have not translated correctly.  Anyone wanting the correct pictures should go to dashboard itself (link above) and click on the “Overview” menu and then “Economic Contribution”.   As represented above the charts don’t capture the pick-up in tourism in the last couple of years.)

And tourism is by far the largest component of our “weightless exports”.    We all know there are specific services firms doing well, either selling abroad directly or (as Ms Graham notes) with their services embedded in other goods exports, and on the other hand we have the film industry (kept alive on massive direct public subsidies) and the export education industry (aided by substantial implicit subsidies, bundling immigration and work access provisions to the sale of educational services).  The bits that are doing very well, standing on their own feet, just have to be very small relative to the size of the economy, and to the scale of the New Zealand economic challenge (closing those huge productivity gaps).

How do we do by international comparison?

Here are exports of services as a share of GDP for the small OECD countries (I’ve left Ireland and Luxembourg off the chart, but –  for various reasons –  their services export shares are “off the charts” high).  Small countries is the relevant comparator here, as countries with large populations naturally tend to have rather lower foreign trade shares.

services x nov 18 2

Services exports from New Zealand have been shrinking as a share of GDP, and our services export share of GDP was low to start with.   This century to date, only three of these small OECD countries have had more of a fall in the services exports share of GDP than New Zealand has.   And all three of them –  Czech Republic, Slovakia and Estonia –  have in any case managed much faster productivity growth than New Zealand over that period.

Our economy isn’t doing well, no matter how much bureaucrats and politicians like to pretend otherwise, and regardless of whether one focuses on the “weightless” bit of the economy or the rest of it.  We do quite well at employing our people, but then wage rates and productivity are now so modest by advanced country standards –  gaps that simply aren’t closing –  that more people feel the need to work.

And strangely, it seems that MFAT’s Economic Divisional Manager has some inkling of this as she ends this particular part of her speech thus

I strongly believe that earth will never be “flat”, as Thomas Friedman claimed, and that geography remains, to a greater or lesser extent, destiny. Digitalisation is not causing the end of geography as a key determinant of prosperity. Industry clusters, international connections and trade, knowledge exchange and IP transfer are all positively correlated with geographical proximity as well as prosperity – in other words, they are much easier for large countries and countries with land borders to achieve. The catch-22 for small, isolated countries is that they are also the very conditions essential to overcoming the disadvantage of geographical distance. This is a huge challenge for New Zealand, both in terms of international policy but also domestically – currently we see the government tackling this challenge through regional policies such as the Provincial Growth Fund.  

Except that it isn’t some sort of “catch-22”.  It is a constraint that New Zealand officials and politicians need to finally get real about.   If – natural resource based opportunities aside – the best opportunities in the world arise from being in close proximity to lots of other people (as markets, skills networks or whatever), then trying to grow New Zealand’s population as a matter of policy –  lots more people in an unpropitious location –  looks crazy.  Many of the people who come would have been better off to have gone somewhere else (if they could).  And the challenge facing the typical longstanding citizen (native or otherwise) –  to manage top-tier global incomes and living standards – is simply made tougher with each new person our governments bring in.  That is not because of access to jobs (that is a straw man non-argument –  you observe full employment in poor, rich and middling countries) but precisely for the sorts of reasons that Ms Graham of MFAT identifies (even if she apparently has not thought fully through the implications of her observation).

Thoughts prompted by the open letter

Michael Reddell China, NZ politics

There was an open letter to the Prime Minister, cc’ed to the Deputy Prime Minister and Foreign Minister, released this morning and signed by 29 people (mostly academics), prompted by

….the reports of intimidation and harassment suffered by Professor Anne-Marie Brady of Canterbury University. According to news reports, she has been repeatedly burgled and her car tampered with, starting from December 2017. Reports have suggested that these events are related to her high-profile academic work on overseas influence campaigns by the government of the People’s Republic of China.

The letter calls for two things

…we echo the recent calls by Professors of Chinese history and literature Geremie Barmé and John Minford for the New Zealand authorities to take the threats against Professor Brady more seriously, in consideration of their implications for all New Zealanders.

(I ran the Barmé/Minford letter here last week.)

We also urge Prime Minister Jacinda Ardern to make a clear statement in defence of academic freedom in New Zealand in light of the Brady case, and to be very clear that any intimidation and threats aimed at silencing academic voices in this country will not be tolerated.

It should be hard for decent people to dissent from the broad thrust of the letter (which even appears to have briefly united ACT and the Green Party –  at least the bits out of office.)  One might quibble about the details –  for my own tastes it seems a bit too focused on “academic freedom” (which is mostly about the relations between universities and their staff), as distinct from the more general freedoms of New Zealand citizens and residents, including those of the ethnic Chinese community, whether or not they happen to be associated with a specific government tertiary institution –  but the thrust of the case really shouldn’t have needed saying, and yet apparently did need to be said.

But I found two things about the statement interesting.  First, who did and didn’t sign.  And, second, the (reported) reaction of the Prime Minister.

By my count, 21 New Zealand-based academics signed (plus a couple of PhD students, and one New Zealander working at a US university).  Of those 21, only one appears to specialise in international relations, and none appear to be specialists in matters to do with China (politics, society, economics, international relations or whatever).

One of the signatories was (former academic and now) consultant Paul Buchanan.  In  an exchange of comments here on Saturday, and in reference to this letter he noted

It appears many academics are reluctant to sign on because a) they fear retribution of one sort or another (say, loss of funding); and b) they personally dislike Ms. Brady and/or claim that her research is flawed etc. The fact that people cannot separate personal animus and/or concern about funding from a defence against criminal harassment is telling. As for her research, her “Magic Weapons” essay is an example of applied research and was not meant to be a theoretical or conceptual path-breaker, so sniping about its quality is pedantic.

Perhaps some of our media might like to ask, for example, those involved in the Contemporary China Research Centre about why not one of them signed this statement (or, so far as I’ve seen, have issued their own statements supporting Professor Brady).   As a reminder

The New Zealand Contemporary China Research Centre is New Zealand’s national research centre on China. We are based at Victoria University of Wellington with New Zealand’s other seven universities all being University Members of the Centre, University of Auckland, Auckland University of Technology, the University of Canterbury, the University of Otago, the University of Waikato, Lincoln University and Massey University, and with each University providing a Deputy Director.

Here is a list of the senior people at CCRC, including the Executive Chairman, Tony Browne (who also happens to chair Victoria’s Confucius Institute, and to sit on the board that advises the PRC government agency on the Confucius programme worldwide).   As the excerpt says, there is a director and then deputy directors in each university, and there are research/senior fellows.

But then here is the Advisory Board to the CCRC.   It includes representatives of MFAT, NZTE, MBIE, and Treasury, as well as the Director of the Asia New Zealand Foundation, the chair of Education New Zealand and the former chair of the New Zealand China Trade Foundation.

The CCRC helps run courses for MFAT.  And it hosts various visiting delegations from PRC government agencies.  Just next week, it is hosting a conference on next year’s Year of Chinese Tourism which event, no doubt, the PRC Embassy smiles benignly on.

Wouldn’t do then for anyone to speak up or speak out.  I don’t suppose there was anything quite as crass as a directive to all to keep quiet, but all those involved surely know which side their bread is buttered on (perhaps they wouldn’t have got appointed if not).  Much as I care about the intimidation and threats to Professor Brady, if there is a narrow issue of academic freedom, it is probably more about the utter silence of the rest of the China-focused New Zealand academic community.  It was perhaps also telling that no university vice-chancellors signed the open letter.  Perhaps they are all sympathetic –  and there have been no reports of Canterbury trying to close Professor Brady down –  but they have enrolments to sell, and the PRC is a big and threatening market.    But, again, perhaps some journalist could ask them about their attitude to attempts to intimidate a prominent New Zealand academic?

I guess the Prime Minister will probably get some direct questions on this issue at her post-Cabinet press conference, or in her weekly media rounds tomorrow, but I was interested in her initial response, as Radio New Zealand reported it.    It was terse and largely empty, apparently attempting to avoid the issue, with brief comments along the line that she “supports” and “defends” academic freedom, but that she couldn’t say anything more substantive until the Police investigation had concluded. She couldn’t even manage –  wasn’t willing to –  make a statement that was (in the words of the signatories)

“very clear that any intimidation and threats aimed at silencing academic voices [or others] in this country will not be tolerated.”

And, again as Radio New Zealand reported it, Professor Brady understands that the Police investigation has already concluded, and the question now is whether the government will show any backbone.     Whose values is the Prime Minister actually sticking up for?

Of course, if anything the Leader of the Opposition, interviewed on Radio New Zealand a few minutes later, was worse.  He managed some quick passing comments vaguely in support of the letter –  I guess he could hardly say he opposed “academic freedom” –  before moving on to run his own (in effect) defence-of-Beijing line.    Rather rashly he declared the US and China to be in a “virtual war”, was more or less defending Huawei (there was “no smoking gun” –  it might be a bit late when there is, surely?), and criticising the government for being a little hesitant about the Belt and Road Initiative (recall that Bridges was the minister who signed us up for a “fusion of civilisations”) and for upsetting China by buying the P8s and stating a few honest words –  never echoed by the PM –  in a defence policy statement.

“We’ve got a situation of inflamed language, particularly from the Foreign Minister whether it’s been on defence strategy, whether it’s been Belt and Road. These things will be of concern to the Chinese and they will be sending a [subtle] signal.”

As if he belonged to the youth wing of the Labour Party, he was reciting lightweight lines about how “we shouldn’t take sides”.   Not in opposing evil?  Not in resisting aggression?   That wasn’t New Zealand’s historical approach –  National or Labour. Then again, his stance seems to be avoiding even taking New Zealand’s own side, given the continued presence of Jian Yang in his caucus, and Yikun Zhang in arranging large donations for his party.

To return, finally for now, to the Prime Minister, TVNZ ran a story/article on Friday night about the decision – no doubt from Beijing –  to deny the Prime Minister a trip to Beijing this year.   With the website version there was a little video clip from the opening moments of her meeting with Chinese premier Li Keqiang in Singapore a couple of weeks ago.  I very rarely listen to such clips, but for some reason did this time.   The clip captures the Prime Minister opening the meeting stating that she was encouraged by “the significant common ground between your vision for China and the policies of my government”.  She went on to observe that “just as you are focused on a balanced development model and the wellbeing of the Chinese government, my government is focused on sustainable economic development and a fair society”.

It is, frankly, sickening and shameful.  Our Prime Minister, elected leader of a free, open and democratic society, governed by the rule of law etc suggests that there is “significant common ground” between her government’s policies and those of one of the most brutal un-free regimes on the planet, that has spent at least the last six years going backwards not forwards on the sorts of values and practices that most New Zealanders cherish,

Sure, Prime Ministers and like need to mutter pleasantries at the start of meetings, but surely “did you travel well, and get a good sleep?” beats this sort of stuff?    And why is she giving recognition and apparent approbation to the desire of the Chinese Communist Party to extend its brutal rule (“the wellbeing of the Chinese government”).

Is there any decent moral core there at all?  No wonder she hasn’t managed a robust defence of free and open debate, of the sort the academic signatories called for.

(I’d been going to write a bit about former NSW premier, former Australian foreign minster, current head of a somewhat Beijing-sympathising think-tank, Bob Carr’s interview on China-related issues on TVNZ’s Q&A last night.   There were plenty of bits to disagree with, but actually compared to either Simon Bridges or Jacinda Ardern he came across as fluent and somewhat reasonable.  Perhaps it helps being out of office, but he was willing to welcome Mike Pence’s efforts to highlight China’s human rights abuses, and was explicit that he would not have signed Australia up to the Belt and Road Initiative.    By his standards, New Zealand’s “leaders” seem very far gone.)

Central bank minutes released: a small victory for transparency

Michael Reddell OIA, Reserve Bank, Transparency

Regular readers will recall that the Reserve Bank has long been deeply resistant to releasing any information relating to OCR decisions or Monetary Policy Statements, other than what they themselves chose to release, whether in the published documents or in subsequent interviews.  That has never been very satisfactory, but the Bank has attempted to carve out for itself a special place, more or less above the provisions of the Official Information Act.

One of the things they’ve consistently refused to release is minutes of the Governing Committee, the body set up by the previous Governor, in which the Governor takes his final OCR decision (and other major decisions, including ones around LVRs).  They had long taken the same stance to the minutes of the predecessor Official Cash Rate Advisory Group, even when the requests related to decisions some time in the past. Often enough, it seemed that there were no written minutes at all (which was probably in breach of the Public Records Act).

I had largely given up on making any progress on this issue (and, anyway, the new statutory Monetary Policy Committee, which will have its own charter on such matters, is coming next year). But for some reason, which I now forget, I had lodged one more request six months ago seeking

1. the minutes of any meetings of the Governing Committee relating to the May MPS,
including minutes of the meeting where the OCR decision was taken;

When the Bank refused to release anything (not even date of meeting, list of attendees, headings –  even if all the substantive content was redacted) I complained to the Ombudsman, noting that (among other things) the Bank quite often released minutes of Board meetings (even with some content withheld).

The Bank regularly releases minutes of the meetings of its own Board (in response to OIA requests), with individual deletions as appropriate.  It seems inconceivable, for example, that the date, time, place of the meeting, the list of attendees, the confirmation of past minutes, and the final decisions of any meetings (themselves reflected in a later published document) could pass a “free and frank”: withholding test, even if (again) it is plausible that if there is any substantial account of the nature of contentious discussion at the meeting that specific element of the material might.

And then I forgot all about the request until a short time ago when an email from the Reserve Bank turned up.

We refer to your complaint to the Office of the Ombudsman (ref: 480453) relating to your request for: “minutes of any meetings of the Governing Committee relating to the May MPS, including minutes of the meeting where the OCR decision was taken.”

The Reserve Bank has reconsidered its initial position and is now releasing with redactions, a copy of the only document within the scope of your request – the Governing Committee minutes in May. The document is attached to this correspondence.

And it has only take six months, which is progress.  Credit to the Ombudsman.

For anyone interested, the minutes themselves are here

Governing Cttee minutes May 2018 OCR

One day perhaps we might even have released –  with a suitable lag – the background papers the Governor (and his new MPC) receive, and upon which they base their decision

I’m not sure there is any new information in the particular minutes released, but having released Governing Committee minutes in this form –  against a request made almost immediately after the relevant OCR decision was released – a small but helpful precedent has been established.   Some material is still withheld on the highly questionable ground of avoiding damage to the substantial economic interests of New Zealand.  One day, the Ombudsman is going to have to provide some substantive guidance on that provision, but for now both he and the Bank seem keen to avoid the Ombudsman having to draw the appropriate line between national economic interests and those of a particular public agency.

 

 

LVR restrictions: towards the FSR

Michael Reddell Financial stabilty, Housing

The Reserve Bank’s latest Financial Stability Report is due out on Wednesday.  Perhaps we will see some further articulation of the Governor’s strange vision of the Bank as a tree god, but I guess the main interest will be in what, if anything, the Governor does with the loan to value controls rushed into place, and then frequently amended, by his predecessor a few years ago.  It is as well to recall that although legislation is going through Parliament at present that will, at least on paper, modestly weaken the Governor’s personal power over monetary policy, in respect of banking regulation his statutory powers remain untrammelled, and unchannelled.  There are few legal constraints on what he  –  an unelected official whose appointment was controlled by unelected and unaccountable academics and company directors –  can do.

Market economists are, understandably enough, focused on the narrow question of whether there will be any changes to the rules announced this week. You can read a summary of their views here.   I remain less interested in that (forecasting) issue than in the cases for and against having such controls in the first place.   They are a new thing: we never had some legal restrictions in the bad old days of a heavily regulated financial system prior to 1984.  But, like weeds or wilding pines, once regulatory controls get in place people come to treat them as normal, the only debate tends to occur around the edges, and it takes huge effort to do something serious about fixing the problem.  Years ago, when the LVR restrictions were first introduced, we were assured they would be temporary (I was still inside the Bank at the time, and as far as I could see senior people genuinely believed it) but now the very idea that willing lenders and willing borrowers should be free to contract on mutually agreeable terms seems to be becoming lost.

The Herald’s economics columnist Brian Fallow used his column last Friday to argue to “Keep the brakes on houses”.  I can’t see the column on line, but the gist of his article is that house prices are high and household debt is high and that unless that combination changes the Reserve Bank shouldn’t think of lifting the LVR controls.  It doesn’t matter that stress tests repeatedly show that banks can cope with big falls in house prices and even big rises in the unemployment rate.  It doesn’t matter that our banks came through the last serious recession –  when household debt to GDP was about as high as it is now –  unscathed. It doesn’t matter that high house and land prices are mostly a phenomenon of the artificial scarcity created by land use restrictions (with high construction costs into the mix).  It doesn’t even seem to matter than there is no evidence that the LVR controls have made banks safer (banks with fewer individual risky loans also need to hold less capital) or the economy more stable.  It doesn’t seem to matter that the LVR controls have acted to favour established (cashed-up) buyers over new entrants to the housing market.  No, even though there is no threat to financial stability, and everyone recognises that LVR limits impede the efficient functioning of financial markets  (and those are the only two criteria the law allows the Bank to act under), the call is simply to leave the controls in place.

It was a bit like people in earlier decades who opposed removing import licenses or exchange controls because of the “foreign exchange constraint” (imports might increase if we took the controls off): papering over symptoms rather than tackling causes is rarely a sensible approach to policy.  Sadly, this government, like its predecessor, seems to be doing almost nothing to fix the underlying problem (and when I heard the UDA announcement over the weekend cited as something that had “worked well” in the UK and Australia one was reminded a new of just how obscene house prices in the UK and Australia remain).  But if the government isn’t doing anything serious, they will no doubt be grateful for the cover the Reserve Bank provides, claiming that somehow it is “doing its bit”, when it has no responsibility (there is “our bit”) for the fundamental problem.

But, of course, with no evidence whatever, the Governor is convinced that he knows best, the banks and markets are too “short-sighted” and so no doubt the controls will remain.  If the Governor is really so convinced he should at least really go to the effort of persuading the Minister of Finance to agree to extend the restrictions to other non-bank lenders.  The LVR controls only apply to banks because they are the only lenders the Reserve Bank Governor himself can order round in this way –  restrictions on other non-bank deposit-takers require the agreement of the Minister of Finance.  We have been fortunate in the last few years that there has been less disintermediation of mortgage business to non-bank lenders than most (including Reserve Bank staff doing the evaluation) had expected.   But if we learned anything from the decades of heavy controls prior to 1984, over time risk-taking will gravitate to institutions where it can occur.  Putting in place a competitively-neutral regulatory framework (treating banks and non-banks similarly) was a huge step forward in the 1980s, and it is unfortunate that the Reserve Bank now treats the same risks differently depending on whether an institution wears a “bank” or “non-bank” label.

At the press conference a few weeks ago for the Monetary Policy Statement, the Governor and his deputy (once a fairly market-oriented economist) indicated that in the forthcoming Financial Stability Review the Bank was planning to outline a more disciplined framework or road-map for assessing when, and whether, adjustments should be made to the LVR controls.  In principle, that sounds sensible and welcome. In principle, it should involve the Bank setting out some markers against which they can be held to account when the next decisions/reviews come round.  Whether it is so in practice only time will tell, but I was disconcerted when I heard them talking of this new framework as something similar to what they have for OCR decisions.

While we have a Reserve Bank there have to be regular monetary policy decisions.  That isn’t so for LVR restrictions, and it would be unfortunate if the initiative the Bank has foreshadowed was also about entrenching LVR controls as a permanent feature of New Zealand’s financial system.  Capital and liquidity requirements, backed by regular and robust stress tests, should remain the heart of our banking regulatory framework, rather than having bureaucrats reach into private businesses –  well-run over decades –  and tell them who they can and can’t lend to, or who they can and can’t employ.  But bureaucrats have incentives to build up their bureau and are typically reluctant to give up powers they’ve once got their hands on.  They are just human, and in their shoes you and I might face similar temptations.  We need banking regulation and supervision –  mostly, in my view, because politicians will bail out large banks in crises and everyone knowing that efforts need to be made to limit the risks –  but its appropriate place is distinctly limited, accountable, and kept in fully in check.   Instead, those paid to hold the Bank to account –  ministers, the Board, FEC –  mostly just accommodate the regulators, at times even egging them on.

On a totally different matter, for anyone interested in a some snippets of New Zealand economic history, you might want to try the latest Newsroom/Radio New Zealand Two Cents’ Worth podcast, which was built around the odd coincidence that –  if you look at the data a bit loosely and from the right angle – for several decades in a row, years ending in 8 had also seen a New Zealand recession.  I did an interview with Bernard Hickey for the podcast, in which he had me run quickly through aspects of the New Zealand economy in each “8” year since 1918.   As I noted to Bernard, there is now a rather large hole in the market for a up-to-date economic history of New Zealand (the last full one appeared in about 1985 and much has been done, much has happened, since then).  Brian Easton’s long-awaited history of New Zealand from an economics perspective – his framing –  is still awaited.

NZ and the PRC: Friday bits and pieces

Michael Reddell China, NZ politics

I noticed in the Herald’s “Dynamic Business” supplement, associated with the Deloitte Top 200 awards (themselves notably short on successful outward-oriented companies based on anything much other than natural resources), that the former Prime Minister John Key was interviewed about China.   It was, to say the least, a bit of a mixed bag.  In his first answer this line appeared

“I think Xi Jinping’s going to go down in history as a good leader of China.”

That would be in the history as written by the Chinese Communist Party (assuming it survives that long)?  I’d accept “consequential”, “influential”, even (in a bleak way) “pathbreaking”, but “good”?  What does John Key possibly see as “good” –  a term that usually has some moral connotation to it – about Xi Jinping’s rule?   It isn’t even as if the economy has been set on firmer foundations, let alone the seizures of power, seizures of territory,  the Xinjiang situation, or whatever.  But I suppose the PRC embassy will have taken note, and doors are likely to remain open in Beijing.

Key was then asked about the (straw man) question about balancing China and the United States.  I don’t particularly agree with his stance but at least –  in contrast to our current Prime Minister –  he seems capable of giving a straightforward answer, including recognising where our values, our culture, and our history take us.

…the reality is that our relationship with China is still a very economic relationship…. In the case of the US and our traditional allies –  Australia particularly – it’s a much different relationship.  They are the people that we culturally feel most at home with.  We share such a massive history.  Everything lines up much more closely there…..

I think if we turned our back on the Chinese, we’d find a lot more Irish an Dutch dairy products would flow into China and less would flow from New Zealand. It might be a bit mercantile but I think that would be negative for the New Zealand economy, for dairy farmers and for lots of New Zealand businesses –  from tourism to education services

I think he is mostly wrong about dairy –  it is a globally traded market and as we are seeing in the soybean market at present in time what doesn’t go to one country ends up going to another (if, say, the Irish and Dutch industries had WMP capability, to divert that product to China would involve not selling to the people they are now selling to).  But at least Key seems willing and able to give a straight answer –  even if it is an amoral one:  “never mind the nature of the regime, we should give priority to businesses selling stuff there”.

There was an interesting snippet in the Herald’s (typically rather well-sourced) “Insider” column in which it is noted that

NZ diplomats have been told the long-expected invitation for Jacinda Ardern to go to Beijing won’t come any time soon.

Perhaps that is the explanation for her shameful refusal to front up for the Herald’s longstanding interview request.  But if so, she needs to rethink her priorities.  Tea at today’s Berchtesgaden beats an open and honest discussion with –  and accountability to – her own citizens and voters, confronting concerns about the activity of the regime at home, abroad, and here in New Zealand?

You could read the account on the Chinese Embassy’s website of her meeting with the PRC Premier Li Keqiang and not come away with any sense of any awkwardness at all, with bizarre talk of working together for the “peace and prosperity” of the Asia-Pacific region.  We are presumably supposed to accept with a straight face words like these from the Premier

He also encouraged New Zealand companies to expand investment in China and boost technological cooperation with China, saying that China will conduct the cooperation on the basis of strict protection of intellectual property rights.

Surely only that distinctive New Zealand “Yeah right” should greet claims like that?.  Perhaps the Prime Minister’s perspective on the meeting would be different, but there is no similar account on the Beehive website (and if MFAT had problems with Beijing’s account, no doubt they have raised those concerns).

Can it really be that deals and donations are all that now matter to her?    If she doesn’t care about the citizens of the PRC, or about surrounding states, or even about how closed an economy China is in many respects, is she really not bothered about the PRC activities here?  Presumably not.  After all, Raymond Huo chairs the Justice committee and sits in her caucus, and Jian Yang sits on the other side, and not a word in heard from the Prime Minister.

There was an interesting post a couple of days ago from Paul Buchanan, the American (but New Zealand resident) former academic and now consultant on issues international.  He began by addressing the somewhat extraordinary suggestion (made by David Parker and the Prime Minister) that New Zealand could be some sort of bridge or broker between the US and China. He is simply dismissive of it, and doesn’t think either Beijing or Washington is likely to take it seriously.

For my tastes, Buchanan’s discussion  is altogether too cold (then again, perhaps his future isn’t tied to New Zealand?).   He suggests

While New Zealand audiences may like it, China and the US are not fooled by the bridge and broker rhetoric. They know that should push come to shove New Zealand will have to make a choice. One involves losing trade revenues, the other involves losing security guarantees. One involves backing a traditional ally, the other breaking with tradition in order to align with a rising power. Neither choice will be pleasant and it behooves foreign policy planners to be doing cost/benefits analysis on each because the moment of decision may be closer than expected.

I’ve disagreed with him in comments here on earlier posts, because I think he grossly overstates the extent of any sort of “economic dependence” of New Zealand on China.

On trade, New Zealand has an addict-like dependency on agricultural commodity and primary good exports, particularly milk solids. Its largest trading partner and importer of those goods is China. Unlike Australia, which can leverage its export of strategic minerals that China needs for its continued economic growth and industrial ambitions under the China 2025 program, New Zealand’s exports are elastic, substitutable by those of competitors and inconsequential to China’s broader strategic planning. This makes New Zealand extremely vulnerable to Chinese economic retaliation for any perceived slight, something that the Chinese have been clear to point out when it comes to subjects such as the South China island-building dispute or Western concerns about the true nature of Chinese developmental aid to Pacific Island Forum countries.

But even if there is some potential for short-term disruption to some sectors or firms, countries largely make their own medium-term fortunes. That was true of us in the past, is today, and will be still in the future.  Policymakers here have been very unwise in continuing to encourage stronger trade links with China, even as they recognise the sorts of threats and disuptions China has proved capable of in other countries, and the more aggressive approach China is taking internationally across a range of fronts.  No serious and free country, none with any integrity whatever, ever prioritises (for any length of time) the interests of a few of its export firms, over the values of its people.  In the medium to longer-term values and interests amount to the same thing.

And it is not as if other countries in years past have not faced these sorts of tensions.  Denmark and the Netherlands had Germany as a major trading partner in the late 1930s, but they didn’t simply roll over and invite Hitler in.

Perhaps more importantly, and a reason why I think the US vs China framing is a distraction, is that whatever the US is or isn’t doing, we face the interference activities of the PRC in our own country.  Simply taking a stand there –  clearing Jian Yang and Raymond Huo out of Parliament, standing up for Anne-Marie Brady and for those ethnic Chinese New Zealanders facing regime pressure and threats, being more open and serious about the cyber-security threats, shunning people with recognised United Front connections (not honouring Yikun Zhang), protecting and promoting an independent Chinese language media here.  These are the sorts of things a minimally decent government would be doing, even if it said not a word about abuses in China or China’s near-abroad.  But not our government: faced with the choice not between China and the US, but between decency on the one hand, and deals and donations on the other, they seem to side with the deals and donations.  And the National Party provides them cover to do so.

On the topic of cyber-security, the Australian papers this week had several stories about PRC cyber-attacks on Australia.   There were two classes of attack in the stories I saw –  one about a resurgence in direct cyber attacks on Australian companies, in violation of some deal Malcolm Turnbull and the PRC had done a couple of years ago.    The other built on this academic article, in which the authors report the results of a study showing how the PRC appeared to get round a similar deal between Barack Obama and the PRC in 2015, by using China Telecom to route selected international internet traffic through China –  where presumably the PRC could spy on it, copy it or whatever –  rather than following the standard (shortest distance) protocols. The authors provided evidence to the Australian media strongly suggesting a specific such attack involving Australia last year.

But here is the thing that interested me.  In the newspaper articles I read we saw senior government officials confirming “a constant, significant effort to steal our intellectual property”, and even a senior Cabinet minister expressing concern about the number and severity of such attacks.

By contrast, what do we get here, but blather from the Prime Minister about needing to keep an eye on cyber-security, and otherwise silence –  “national security” don’t you know, providing cover for anything ministers and officials don’t want to talk about.  I did see a Radio New Zealand article quoting a PWC person saying there was no evidence New Zealand had been caught up in the first class of attacks described above.  It would be nice to hear it from official sources, but even if it is true in the specific case, how likely is that the PRC approach to New Zealand is very much different than that to Australia –  take what they want, and can get at?   Occasionally, I make glib remarks about how perhaps New Zealand has nothing much advanced to steal, and when I do I get firmly put in my place, with links to various advanced university departments (for example).  Surely we might reasonably expect the Prime Minister or the Minister for the Intelligence Services to front up on this sort of issue, at least to give us reason to believe (confidently) that they aren’t living in some fool’s paradise, convinced they are uniquely immune from the efforts of the Ministry for State Security?

And finally,  I was sent yesterday a copy of a statement by a group called the New Zealand Values Alliance, which appears to be a group of ethnic Chinese people living in New Zealand who are concerned about the intrusion of the PRC into New Zealand.  (There is a similar, more prominent group in Australia, called the Australian Values Alliance.)   This was the statement

We, New Zealand Values Alliance(NZVA) , hereby issue the following declaration:

It is learned from media that the prominent China researcher Anne-Marie Brady has encountered on-going harassment which has recently widened to include a vehicle  sabotage of her private car, which “absolutely posed a risk to her life”.  We hereby express our concern and condemnation on the matter.

To our knowledge, similar harassments and threats sometimes happen to people who criticize CCP. Such harassments include text intimidation, tracking, stalking and a variety of harassment activities which has now escalated to sabotaging private vehicle to seriously threaten life safety.

We are very concerned about the personal safety of people who publicly criticize CCP. We earnestly appeal to the NZ government and police to pay close attention to the safety of those human rights activists and researchers against dictatorships and give more attention  to the rampant activities related to foreign political infiltration. Meanwhile an investigation into foreign interference should be started ASAP   and relevant laws be established for deterrence and punishment against related activities from agents with foreign interests.

Hard to disagree (the Values Alliance had an earlier statement about Jian Yang, reported here).  The organiser, a relatively recent migrant from China, Freeman Yu, has noted on his Twitter feed his own experience of what he talks of

Does this sort of thing bother our politicians at all?

You might have hoped that New Zealand political leaders would be speaking out  (let alone New Zealand academics working on China and/or international relations).  Former Prime Ministers, former Opposition leaders, former foreign ministers?  People like Don McKinnon, Jenny Shipley, Don Brash, Murray McCully, Helen Clark, Phil Goff, Geoffrey Palmer, Jim McLay, Jim Bolger or Mike Moore.  But, it appears, not a word from any of them, let alone Bill English or John Key.   A sad commentary, that rather tends to make the point Anne-Marie Brady was making in her paper about how too many of our elites have been persuaded that keeping quiet and going along is somehow in the best interests of New Zealand.  In fact, it largely just serves Beijing’s interests.